We've Got Hollywood Covered

Even Hollywood Can’t Save China’s Box Office This Year

Relaxed subsidies and a crackdown on ”ghost screenings“ have caused the Middle Kingdom’s movie market to plateau

The release of the year-end Chinese box office numbers has become an exercise in self-congratulation, as the Middle Kingdom has celebrated astronomical increases — like last year’s 49 percent — in its annual gross, putting it on an accelerating pace to catch the U.S. as the world’s largest movie market. This year, however, will be different – and the scores of Hollywood superheroes who graced China’s silver screens in 2016 couldn’t swoop in to save the day.

According to data from Ent Group, China’s box office is up just 4.5 percent through Dec. 15 compared with the same time last year – and actually down 10.5 percent from July on. After surging from $4.8 billion to $6.8 billion between 2014 and 2015, the Chinese box office may have to wait another year to break the $7 billion mark.

So what happened? Insiders point to handful of major causes, namely increased vigilance of “ghost screenings” — when a distributor buys out seats in bulk, only to re-sell them at a lower price on the secondary market, a disappointing slate of local films aside from “the Mermaid” – and possibly most importantly, a reduction in the exceedingly generous online ticketing subsidies doled out by huge conglomerates like Baidu, Alibaba and Tencent, who have been using those carrots to attract users to their payment platforms.

Under the subsidies, Chinese movie fans could see new Hollywood films in IMAX 3D for as little as $5. Prices have now reverted closer to the actual cost, which makes a night at the movies not as good of a deal as it was before — and likely depressed demand, especially on the margins and in less wealthy cities.

And as the box office started to decline for the first time in years, newly desperate times apparently called for desperate measures: There are 38 imported films scheduled for release in China through Dec. 31, four more than the official quota. According to Chinese media reports, government censors said the additional films are part of “cultural exchange projects” and do not reflect a breaching of the quota, but semantics aside, there are still four additional non-Chinese films playing in Middle Kingdom multiplexes this year.

Several of those movies, including “Sully,” “Hacksaw Ridge” and “Miss Peregrine’s Home for Peculiar Children” even got December release dates, which is a time of year typically reserved for homegrown fare.

China’s box office began the year with a bang, as Stephen Chow’s “The Mermaid” rolled to $528 million, making it easily the highest-grossing film of all time in China – knocking out “Furious 7.” However, no other homegrown Chinese film made more than the $185 million “The Monkey King 2 3D” brought in, which was a major letdown for Chinese cinema. Last year, five Chinese movies (“Monster Hunt,” “Mojin: The Lost Legend,” “Lost in Hong Kong,” “Goodbye Mr. Loser” and “Jian Bing Man”) cleared the $185 million mark.

Hollywood tentpoles couldn’t make up the gap — “Zootopia,” “Captain America: Civil War” and “Warcraft” were massive hits in China, but “Batman v Superman: Dawn of Justice” failed to clear the $100 million mark, “The Force Awakens” failed to make the impact it did in virtually every other market — and “Suicide Squad” didn’t even get a Chinese release.

China’s box office should find itself back on a growth trajectory after recovering from the shock of having customers pay closer to market price – and assuming local cinema can recover from a down year. The average Chinese moviegoer still sees just one film a year, according to data from Chinese online ticket seller WeYing. The corresponding number in the U.S. is 3.8, per data from the MPAA.

And the country is adding theaters by the hundred, with Imax planning to get up to 1,000 screens in mainland China in the near future. There are currently slightly more than 1,000 Imax theaters in the world.

China continues to aggressively build a film industry. But now, for the first time, it’s a question of who will come.